Tolhurst v Crickett Pty Ltd [2001] NSWSC 1203

New South Wales Supreme Court

CITATION : Tolhurst v Crickett Pty Ltd [2001] NSWSC 1203 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5961/01 HEARING DATE(S) : 14/12/01 JUDGMENT DATE : 14 December 2001

PARTIES : Linda Maree Tolhurst and Alexander Bryce Gardiner (P) Crickett Pty Ltd (In liq) (D) JUDGMENT OF : Young CJ in Eq

COUNSEL : M Dulhunty (P) M Southwick (D) SOLICITORS : Miller Goddard (P) K M Harkness & Co (D) CATCHWORDS : CONVEYANCING [189]- Caveat- Equitable charge- Preferable but not absolutely necessary for amount to be specified. MORTGAGES [16]- Equitable mortgage- Company paying shareholders' mortgage- Company may hold equitable charge- Caveat retained. LEGISLATION CITED : Real Property Act 1900, s 74MA CASES CITED : Ghana Commercial Bank v Chandiram [1960] AC 732 DECISION : See paras 12 and 13

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5961/01 YOUNG CJ in EQ

FRIDAY 14 DECEMBER 2001 TOLHURST v CRICKETT PTY LTD (IN LIQ)

Judgment 1 His Honour: These are proceedings under s 74MA of the Real Property Act 1900 by the registered proprietors of property in Concord that a caveat placed on their title be removed. The caveat is number 8183990 and was lodged by Crickett Pty Ltd (in liquidation). The estate or interest claimed is said to be "constructive trust". 2 The caveator is a company of which the registered proprietors are, or were, officers and shareholders, and the caveat alleges that that company "by making mortgage repayments paid in part for the property". 3 With respect, this is not particularly well set out. However, the underlying evidence shows that the liquidator's claim is that on investigation of what he called "related parties' transactions", by analysing the cheque butts of the company from July 1997 to its liquidation, he can see that almost every second month a payment was made from the company's funds to pay the mortgage on the property over which the two individuals associated with the company were liable to pay principal and interest. 4 The female plaintiff says that she was never a director of the company, she was for a time its secretary, but she said she did not have any active conduct or control in the running of the entity. She does not deny that she was a shareholder. 5 The liquidator considers that up to $32,222 was paid out of the company's funds, partially to discharge the mortgage to Metropolitan Credit Union Ltd. The title documents show that that company was the mortgagee of the property in question. 6 The caveat does not quantify the liquidator's claim. It probably should because, unless it is quantified, people who have inferior charges on the land will not be able to assess their true position. 7 However, it is the rule these days that one is not as strict on the form of caveat as the court once was, and it is clear that in a situation where one has a liquidator involved all that has to happen is that the best particulars of the debt can be given. The liquidator has indicated that if he is secured in some substitute way for $32,222, which appears, from his investigations to date, to be the maximum of his claim, he will remove the caveat. 8 The law is that if A pays in whole or in part a mortgage owed by B to C, then the usual construction of that scenario is that A did not intend to discharge the mortgage, but to have the appropriate interest transferred or held on trust for him; see Ghana Commercial Bank v Chandiram [1960] AC 732 and Fisher and Lightwood Law of Mortgage Australian edition (Butterworths, Sydney, 1995) at para [14.6]. 9 Accordingly, in the absence of some explanation, there would be a case that there is a trust either against the mortgagee or the registered proprietors, or perhaps both, in respect of an interest in the mortgage to secure the liquidator for the sum that was paid out, which on the current evidence was a maximum of $32,222. 10 The plaintiffs have given no evidence to counter the suggestion made in the liquidator's evidence and the accounts which were given to them in correspondence over the last few days. At least the male plaintiff was the controlling officer of the company, and the absence of any explanation is a very significant matter. 11 Ms Dulhunty, who appeared for the plaintiffs, says that the liquidator has not produced bank statements and cheque books and proved his case properly. Two things could be said against that. First of all, the company was in the control of, at least, the male plaintiff, and the liquidator has come into it during administration and after administration. The second is that there is just no denial on the part of either of the plaintiffs that they were using the company's money to pay their own personal mortgage. 12 The company appears now to be insolvent, so that the creditors are interested in a recovery. In the circumstances, it seems to me that the caveat may well have substance and unless a substitute security is given it should remain. 13 So the court notes that the defendant is prepared to remove the caveat if it has a satisfactory substitute security for $32,222; otherwise the proceedings are dismissed. The plaintiffs are to pay the defendant's costs. ************************

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